"It's like a bolt of electricity is going around their classroom," the education secretary says.

"You can see the pupils are listening and excited. The teacher is commanding the room, conveying their passion for their subject. They are stretching those who need more of a challenge and giving extra help to those who need it."

The way he's speaking, he's met quite a few. Many of whom have been winners at the Teaching Awards in previous years, he says.

Balls says he has "tremendous respect" for these outstanding professionals.

Two weeks ago, he met one winner, Nick Wergan, for the second time. Wergan swapped his City job to be an English teacher, taking about a 90% pay cut, and is now an assistant head.

"He was just as inspiring and excited by his subject as when I had met him two years ago and presented him with his award for outstanding new teacher of the year," Balls says.

There are 40,000 more teachers than there were in 1997 and they are the best qualified they have ever been, he says. And the best paid, he adds.

But for how much longer? Last month, the education secretary became the first minister to hint at how Labour would make spending cuts in education worth more than £2bn – 5% of the total schools budget.

Teachers' salaries have risen by 19% in real terms since 1997. One way to reduce costs is to ensure teachers' wage rises in the next three-year deal starting in 2011 are kept low.

While there are no plans to cut the number of teachers and teaching assistants, a number of senior non-frontline staff could be axed without the quality of teaching suffering, he said.

Another £250m could be saved by cutting about 3,000 senior school jobs, mainly through "natural wastage". More than 300 jobs in Whitehall, which involve advising schools about the curriculum, could go, he added.

Just for the record, he says there's no chance of Building Schools for the Future being put on hold.

But one of his favoured options to cut costs is for comprehensives and other state schools to form federations.

A federation is a governance structure whereby one or more schools share a single governing body. One headteacher, sometimes known as an "executive head", may run two or even three schools with a team of deputies. Those shortlisted for this year's Teaching Awards know all about this – six are executive heads.

"I'm not going to impose from Whitehall what schools should do," says Balls. But "schools are seeing that working in partnerships in federations actually makes sense," he adds.

On a trip to Yorkshire a few weeks ago, Balls says he saw four secondary schools working together to provide opportunities for sixth-formers and share tips on leadership. "We are encouraging good schools to take on running or sponsoring other schools. When you have a federation, it does mean you can be more efficient."

Efficiency savings aside, what does the education secretary think will have been his greatest achievement should there be a change of government next year?

"National Challenge," he says decisively. This is the government's programme to help so-called under-performing schools, in which fewer than 30% of pupils achieve five A* to C grades including maths and English.

"We can now be uncompromising and not accept excuses – every school can be a good school," he says.

No doubt many present at the Teaching Awards ceremony hoped that Balls would have abolished league tables. To them, he says: "I'm not going to abolish them, it is not in my power." "But," he adds, "they take a very narrow view."

Unsurprisingly, Balls is less than impressed with the comments of Tesco's chief executive, Sir Terry Leahy, recently. Leahy attacked "woefully low" standards in Britain's education system, blaming the government for a surplus of quangos and guideline overkill.

Joining other business figures who have publicly voiced discontent with Labour in recent weeks, Leahy said that Tesco, as Britain's largest private employer, depended on high standards of education but was not getting them.

"Sadly, despite all the money that has been spent, standards are still woefully low in too many schools," he told a convention hosted by the retail thinktank IGD. "Employers like us … are often left to pick up the pieces.

To this, Balls replies: "Are schools less good at delivering the skills that employers need? Absolutely not.

"There was a time, 30 to 40 years ago, when only a minority got the best qualifications. These days we need all young people to have IT, maths and English. Good schools are making sure that they have systems in place to monitor the progress of their pupils and manage their budgets."

And that is just what the Teaching Awards winners are doing – and more.